Investment Advice for Presidential Candidates

The latest New York Times headline about Barack Obama's financial investments has the candidate claiming that they did not present a conflict of interest. From what I can tell, there is no ethical problem here. The problem is that Senator Obama should have a better stockbroker. Or, better yet, he should have no stockbroker.

If I were seeking or holding political office, I would not put my financial assets in a blind trust. I would never want to put myself in a position of having to claim, as Obama is now doing, "At no point did I know what stocks were held. And at no point did I direct how those stocks were invested." This is terrible language for a candidate to have to say. It combines the phrasing of a legal technicality with the shifting of blame to an employee. The speculative investments also present the candidate as taking advantage of opportunities that are not available to ordinary folks. This is not the image that a candidate wants to present.

Compare that with a candidate who does not establish a blind trust--no abdication of responsibility, no suggestion that someone else is working in secrecy on his or her behalf. With no blind trust, the candidate shouldn't hold individual stocks, to avoid any suggestion of favoritism. Instead, the candidate can put all stock investments in a low-cost, broadly based index fund, like this one. Now, the candidate is setting an example that all American savers can follow. The candidate is also not playing favorites among companies. He or she does well when every company listed on a major exchange does well.

That's a much better strategy, particularly since the get-rich-quick element of politics can always come later, on the lecture circuit or the book tour.